California takes big first step toward floating offshore wind

California has a goal of building gigawatts of wind power off its coast by the end of the decade. To meet that goal, it has to create a floating offshore wind industry from scratch.

Last week, state lawmakers took a key step in that process: passing a bill that would help California kick-start its nascent offshore wind industry by purchasing massive amounts of power from early-stage projects that might be too big or too risky for other potential buyers.

The passage of AB 1373, which Governor Gavin Newsom (D) has pledged to sign into law, is just the first in a series of steps needed to build the massive offshore transmission lines, port facilities, turbine manufacturing capacity and extensive supply chains needed to reach its goals. But energy industry groups agree that without the central procurement mechanism the bill aims to create, California’s offshore wind ambitions won’t become reality.

“This was the tip-of-the-spear issue,” said Molly Croll, director of Pacific offshore wind at American Clean Power, a clean energy trade group. ​“It doesn’t provide complete market certainty — but it provides much more market clarity than we had before.”

If signed into law, AB 1373 would allow the California Public Utilities Commission to authorize the California Department of Water Resources, which operates dams and aqueducts across the state, to sign contracts committing to purchase gigawatts’ worth of generation from yet-to-be-built offshore wind farms and then pass the costs on to all Californians.

AB 1373 creates a similar path for these state agencies to authorize and contract power purchases from large-scale geothermal power plants, as well as a proposed pumped-hydropower project in Southern California — two other types of resources called for in California’s long-range clean energy targets.

The latest of CPUC’s plans call for 4,700 MW of offshore floating wind, 2,000 MW of geothermal power plants and 2,000 MW of long-duration storage resources by 2035 to meet the state’s mandate to slash carbon emissions while maintaining grid reliability. While California is already building gigawatts of solar and lithium-ion batteries, it needs a more diverse mix of resources to reduce its reliance on fossil-gas-fired power plants to provide power when its grid comes up short.

Offshore wind in particular could help save the state billions of dollars it would otherwise have to spend on batteries and other energy-storage resources to fill its significant and growing gaps in electricity supply during late afternoon and evening hours. That’s because offshore wind generates most of its power in the evenings and overnight.

But not even the biggest utility in California can muster the buying power or justify the long-term power purchases at the scale being contemplated, Croll said.

“It’s very hard to fit a 1,000-megawatt or more offshore wind project” into a single utility’s procurement plans, she said. ​“It’s new technology; it requires some new infrastructure; it requires a contract signed much longer in advance of commercial operation than typical renewable projects require.”

That’s why the state has decided to step in.

Similar approach, deeper challenges

California’s new bill isn’t the first effort of its kind. Similar logic has driven state-directed offshore wind procurement schemes in New York, Massachusetts, New Jersey and other East Coast states with gigawatt-scale offshore wind mandates, Croll noted.

New York has tasked the state’s energy agency, the New York State Energy Research and Development Authority, with running the competitive solicitations to fulfill the state’s 9-gigawatt offshore wind target for 2035. Massachusetts used a different tactic, mandating that its largest utilities procure the resources needed to hit the state’s target of 5.6 gigawatts of offshore wind power by 2027. And New Jersey has launched a state-coordinated offshore wind transmission plan to fulfill its mandate of 11 gigawatts of offshore wind by 2040.

But California’s plan is even tougher to pull off, because its deep coastal waters require wind turbines that can float freely — a technology that’s still in the early stages compared to turbines that are anchored into the seabed. As of the end of 2022, only 171 megawatts of floating wind turbines were operational worldwide, a fraction of the 64.3 gigawatts of fixed-bottom offshore wind deployed. The largest floating wind project in the world, Equinor’s 94.6-megawatt project commissioned in August off the coast of Norway, makes up a fraction of California’s 2030 target.

Though it’s just getting off the ground, the potential for floating offshore wind eclipses that of fixed-bottom offshore wind turbines, according to U.S. Department of Energy estimates, simply because there’s a lot more deep ocean than there are shallow coastal ocean sites.

But for California to take a leading role in this nascent industry — as it must to hit its targets — will require an extraordinary coordination of public-policy commitment and private-sector investment, said Mike O’Boyle, senior director of electricity at think tank Energy Innovation.

O’Boyle worked on a 2022 study highlighting the central role that offshore wind, geothermal power and other clean energy resources must play to allow California to increase its annual share of carbon-free electricity from about 55 percent today to 85 percent by 2030. But smaller-scale offshore wind projects ​“are inordinately expensive if you want to scale the industry, and not large enough to invest in a domestic supply chain in any meaningful scale,” he said.

“What you want” is large-scale projects in the hundreds of megawatts to gigawatts scale ​“if you want to meet the goals we’ve outlined,” he said — ​“especially if you want to do so cost-effectively and in a way that justifies the industry’s continued investment in California.”

Central procurement makes that scale possible, he said.

What needs to happen next for California to scale up floating offshore wind

In 2021, California won approval to open tracts of ocean waters to offshore wind developers from the Bureau of Ocean Energy Management, which regulates energy development in federal waters. Last December, BOEM held the first auction of offshore wind rights on the Pacific Coast, with winning bidders spending a combined $757 million to lease tracts covering 373,000 acres in five lease areas near Northern and Central California capable of hosting up to a total of 4.5 gigawatts of renewable generation capacity.

Those companies, which include major global wind developers such as Equinor, Invenergy and RWE, ​“are about to be starting on the early phases of project design and starting site surveys,” Croll said, as part of a phased approach to meeting the series of federal requirements to begin development.

The permitting process for offshore wind can take years, as the experience of projects on the East Coast has proven. But ​“from the developer side, there are many major funding decisions that are right around the corner,” she said. Without a solid commitment from a creditworthy entity like California’s government to buy power under long-term contracts, ​“I believe developers would be struggling to execute on those next investments — they’d be waiting to see if the market would materialize.”

While California hasn’t yet set a legally binding mandate for offshore wind, a law passed in 2021 ordered the California Energy Commission to study the maximum feasible amount that could be achieved over the next 30 years. The CEC issued a report in 2022 proposing a target of 3 to 5 gigawatts of offshore wind by 2030, and 25 gigawatts by 2045.

But since California has not passed legislation mandating a specific amount of offshore wind, it’s up to the California Public Utilities Commission to set requirements. The groundwork for that process has been teed up as part of the CPUC’s broader Integrated Resource Plan process, which is how it orders utilities and community power providers to procure generation to meet future needs. But the precise method by which the CPUC will align those procurement processes, and on what precise timelines, remains to be worked out, Croll said.

Once the CPUC has established these rules, the Department of Water Resources will be authorized to run a competitive solicitation in which wind power developers can compete to fill the needs determined by the CPUC, she said. But a lot of other things need to be happening simultaneously.

One is transmission development, Croll said. CAISO, California’s grid operator, works with the CPUC to determine where and how much new transmission needs to be built to connect new generation resources. Earlier this year, CAISO set out a $7.3 billion plan for transmission projects across Southern California. CAISO’s planning for Central and Northern California transmission projects — including ideas for building long-range undersea transmission cables to connect offshore wind farms — is up next.

“Transmission and procurement are inextricably linked,” Croll said. Action by the CPUC and Department of Water Resources toward procurement of energy from prospective offshore wind farms ​“gives the CAISO confidence to move forward with transmission buildout and gives developers what they need to move through the interconnection process.”

Transmission can make up a significant portion of offshore wind development cost, O’Boyle noted. East Coast states and federal agencies are grappling with the complexities of planning more integrated offshore transmission networks that cross the jurisdictional boundaries of multiple utilities, states and grid operators, rather than forcing each wind farm to plan and pay for its own separate high-voltage direct current line to shore.

Similar coordination will be important for California to reduce the cost of offshore wind transmission, he said. ​“The more certainty about how much transmission interconnection will cost and who will pay for it, the lower cost and more competitive the project bids can be.”

Port facilities are another key part of getting offshore wind up and running, Croll said. The Port of Long Beach, one of the country’s busiest seaports, and the much smaller Port of Humboldt on California’s northern coast, are both preparing plans to serve as ​“staging and integration ports” for assembling floating offshore wind turbines and serving the ships to tow them to where they’ll be installed offshore, she said.

“Again, this is where procurement matters,” she added. Ports need to invest upfront in the infrastructure to support these activities. That means both securing public funding and attracting a host of private companies that will ultimately be paying rent to the port for its facilities. ​“All of those companies need confidence” before moving forward.

Croll said it’s ​“certainly possible” for California to reach its minimum target of 2 to 5 gigawatts of offshore wind by 2030 despite these complex interdependencies. ​“But a lot of things have to align — and align very tightly,” she said. ​“You need transmission to be done on time, procurement to be done on time, permitting to be done on time, ports to be done on time. That means extraordinary coordination and public policy alignment, as well as sustained political will.”

O’Boyle named several other deployment risks beyond securing a central buyer, including more efficient permitting processes, proactive transmission planning, and local hostility toward development.

“Those are things that are probably missing from this legislation that need to be worked out,” he said.